“Law of the Case” Did Not Bar Summary Judgment Where First Appellate Opinion Was “Contingent” on Unresolved Issues

On a previous appeal of the same case, the Alabama Supreme Court reversed a summary judgment against a lessor’s fraud claim. That decision was not the “law of the case,” however, because it was premised on an issue the earlier decision did not reach — the merits of a logically prior contract claim. The trial court was thus free, after the first remand, to re-enter summary judgment against the fraud claim. This time, that judgment was affirmed. United Land Corp. v. Drummond Co., No. 1061342 (Ala. Mar. 7, 2008).

This case involves a coal mining lease, and went before the state’s high court twice. We will call the first appeal Drummond I. The second appeal — the subject of this entry — we call Drummond II.

- Drummond I -

United Land leased Drummond the right to strip-mine coal from its property. The lease obligated Drummond to remove all the coal that was “economically recoverable.” The parties disagreed over whether Drummond had done this. Eventually, United Land sued. It alleged that Drummond had breached the lease by not removing all of the coal, while misrepresenting that it had in fact done so.

In the proceedings that spawned the first appeal, the circuit court entered summary judgment for Drummond and dismissed both the contract and fraud claims. The court reasoned, in relevant part, that United Land’s rights under the lease had expired.

The Supreme Court of Alabama reversed. Even if the lease had expired, the Court wrote, the parties had continued to mine and accept royalties under its aegis. It was thus converted into a tenancy at will, and its terms still controlled. If Drummond had breached those terms, then United Land’s claims were viable. The state’s high court expressly stated that it was offering no opinion on the merits of the contract claim; it was saying only that the circuit court had wrongly dismissed it. The fraud claim, for its part, could not be dismissed for being based on an expired lease, because the terms of that lease remained effective.

- Drummond II –

On remand, the circuit court again entered summary judgment for Drummond and dismissed both claims. United Land appealed. It argued that the Alabama Supreme Court’s previous determination that the fraud claim was viable — including, specifically, the court’s acknowledgement that some evidence suggested that Drummond had not mined all the coal, and had misrepresented doing so — that all this comprised the law of the case, and entitled United Land to a jury trial on the fraud claim.

The Alabama Supreme Court rejected this analysis. The law-of-the-case doctrine did not apply, nor bar the circuit court from again dismissing the fraud claim. First, the appellate court affirmed the dismissal of the contract claim. The court reminded the parties that its earlier decision had explicitly withheld judgment on the contract claim’s merits. Now, the high court reached those merits and held that Drummond had not breached the lease.

This, in turn, was fatal to the fraud claim. The alleged fraud consisted in Drummond’s supposedly misrepresenting whether it had breached the contract. The conclusion that Drummond had not breached the agreement necessarily sank the fraud claim. The earlier opinion had recognized the interrelation of the claims, and this made the law-of-the-case doctrine inapplicable. The Supreme Court’s previous discussion of the fraud claim “depended on the existence of contractual rights that made any alleged misrepresentation material.” But the court had now ruled that Drummond had not infracted those rights. Any misrepresentation about whether Drummond had breached the lease was thus immaterial.

The Supreme Court’s earlier statements about the fraud claim could not in this context stand as the law of the case.  Putting the rule broadly, the court wrote: “The law-of-the-case doctrine does not apply . . . where, as here, the holding is necessarily contingent on resolution of other issues in the case.”

The circuit court was thus free on remand to again dismiss the fraud claim. Moreover, given the affirmed dismissal of the contract claim, the summary judgment against the fraud claim was correct. The judgment of the circuit court was affirmed.